Consider a market consisting of two farms producing same quality of rice. The market demand curve and the market supply curve for rice are given by:
qD = 250 p for 0 ? p ? 250
= 0 for p > 250
qS = 150 + p for p ?10
= 0 for 0 ?p < 10
What will be equilibrium price?
Answer & explanation
Correct answer: option 2
Since at equilibrium price market clears, we find the equilibrium price by equating market demand and supply and solve for p.
250-p = 150+ p
100 = 2p
50 = p